Advisors: Schools owed millions in local taxes

Beaufort County has been taking school district dollars from local tax collections to help pay for the district's share in the New River Tax Increment Financing District, school leaders learned in executive session on Tuesday night.

That's not how it's supposed to work, agreed accountants hired to look into the matter and school district lawyers.

Beaufort County should take the incremental TIF dollars out of the money the state reimburses the schools instead, they said.

It's a matter of mechanics, of interpretation, and of about $2 million that could be used to operate schools next year and prevent further cuts.

The school board re-certified its 2011-12 operational budget Tuesday night with the same total of $174 million in expenses; however, the revised, unanimously-passed motion includes a 1.6 mill increase that would raise taxes on commercial property and secondary homes.

"The attorneys are confident we've been owed that money," said Steve Morillo, who represents Hilton Head Island on the school board. "And we're not even trying to recover the past inaccuracies."

In June, the school district officials retained an accounting firm - McAbee, Talbert, Halliday & Co. of Spartanburg - to determine how much revenue is available from the New River TIF. Representatives from that firm and the school district's law firm Childs & Halligan both came to the same conclusion after pouring over state legislation that enables TIFs, as well as the agreement between the county and the county schools specifically on the New River TIF.

District Chief of Operations Phyllis White said that the expert's testimony explained part of the mystery of how the school district lost millions in revenue following the 2009 reassessment.

"They rolled back the value of a mill based on collections that had already had the TIF removed," she said.

When the school district agreed to participate in the New River Tax Increment Financing District in 2002, it did so on one condition, she said.

"We chose to opt in as long as we were not going to sustain a loss," said White. Specifically, the agreement signed between the county and school district says that "the County agrees that millage for the School District shall be adjusted so as to replace any such lost or foregone revenues" whether as a result of state legislation, funding formulas or property assessments within the TIF district.

School Board Chairman Fred Washington said the experts highlighted a process they believe should be changed.

County Chief Financial Officer "David Starkey and the crew have done a good job in accounting for every penny," said Washington. "The issue is the mechanics based on a state law and the New River TIF agreement we have."

White agreed.

"The accounting records the county has on this TIF are very accurate, very meticulous," she said. "After researching the mechanics of how the incremental amount should be handled, we believe it should be done differently."

White said she hopes school and county officials can agree and fix the mechanics before the upcoming reassessment in 2013.

The accounting firm was also hired to look into why the school district had lost so much revenue - $4.4 million - from a rollback that was supposed to be "revenue neutral." Some of that is unrelated to the TIF, including many second homeowners claiming South Carolina as their primary residence to avoid paying school operations property taxes, and a decrease in collections due the economy.

But some portion of the heavy losses (like the school district receiving $111 million in local taxes this year when they were expecting $116 million), is directly attributable to the current TIF process.

TIFs, which pay for improvements for future growth within a specific area, are complicated. The state legislation enabling them is predictably complex, and the agreement between the schools and the county on New River adds further intricacy. Therefore, the fact the school district was losing money on New River TIF wasn't obvious to anyone at first.

Washington said it was retired Lady's Island representative Jim Bequette who first began urging the school district to look into how the money was being collected.

Stu Rodman, chairman of Beaufort County Council's Finance Committee, has accepted an invitation from School Board Chairman Fred Washington to attend a meeting at 4 p.m. today at Okatie Elementary School.

The topic of the meeting is the New River Tax Increment Finance District and the reassessment rollback. A quorum of County Council may be present at this meeting.

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